We need to bury the ideology of economic liberalism

August 22, 2011

Any observer with eyes and a moderate level of objectivity would have to admit, if only in private, that our second historical experiment with economic liberalism – neoliberalism – can’t work as advertised. It isn’t remotely possible that mass prosperity can be achieved in an economic structure where just 500 corporations, managed solely for profit, control 40% of global revenues. Or in a structure that channels financial wealth and income into an ever tighter group of elites. Or where ongoing technological advances work only to remove purchasing power from the population.

High inequality in distribution isn’t sustainable on purely economic grounds: concentrated income can work in a global economy only if it’s continuously re-invested – but such investment can’t be profitable over the long term because of the diminished mass purchasing power. We can see how this logic played out over the past decades – the only periods of quasi-prosperity were during bubble expansions which inevitably collapsed. There can be no doubt where economic liberalism is taking us.

It’s also not sustainable on political grounds unless one argues that populations can be coerced into accepting continued diminishments of living standards in the face of ever rising technological capacity. For neoliberalism to succeed, democracy itself must be rolled back to an era before the American Revolution. How appropriate then is the 18th century garb of the Tea Partiers!

PIMCO billionaire Bill Gross, in a NYT article yesterday, states the obvious: “Capitalism in its raw form can’t pull us out of this hole.” His solution is for the government to put “a shovel in the hands” of workers to create some jobs, and also to increase taxes and reduce “entitlements”.

While we certainly could use more “shovels” to create and sustain our infrastructure, it’s not a real solution. And further cuts in living standards for the majority will only exacerbate the basic unsustainability of neoliberalism.

After two global wars and a depression in the first half of the 20th century, societies throughout the world made the first tentative steps toward fairer distributions. And, not coincidentally, the period between 1945 and 1975 was the most widely prosperous in history. Gross is right that the “private sector is not going to do it”. A more precise statement, though, is that “economic liberalism is not going to do it”, if by “it” is meant a prosperous world.

What is necessary today is to finally bury the ideology of economic liberalism – the false religion that prosperity can somehow be achieved through private greed and anti-social individualism. The ideology of economic individualism goes against the essential social nature of humanity, as recognized by all psychological and anthropological research, is weirdly alien to the cooperative requirements of corporate enterprise, and is leading us into an ever more undemocratic world of concentrated economic power and austerity.

We need to look back at the social democratic ideas of the postwar period and identify what worked, what didn’t, and why. Much of the failure of the 1970’s was due to the economic liberal elements that co-existed within social democracy – especially unstable corporate and nation based competition for markets and an irrational currency structure.

We certainly have the minds to come up with a reasonably efficient system that guarantees the vast technological resources we have at our disposal are used for the benefit of all. In many ways it should be less complex today than in the past since economic power is far more concentrated and therefore easier to regulate and control. The solution must ultimately be global but that’s actually promising since the world has never been more connected or ready for it. We need to reject all ideas, (be they from billionaires, politicians, or economists), that do nothing other than attempt to sustain the failed liberal project, and focus instead on real solutions that are democratic and welfare enhancing.